WTO

ARPN readers know that one of the core tenets of the Resource Wars thesis is that the market for strategic and critical metals is never immune to government interventions. Witness today’s Bloomberg report: “China Said to Add 10,000 Tons to Rare Earths Stockpiles.”

Bloomberg reports:

“China may stockpile more medium-to-heavy rare earths this year such as terbium, lutetium and yttrium, which are used in applications ranging from lasers to nuclear reactors, said China Merchants’ Peng [Bo].

“China’s own industrial sector, in its rudimentary form, isn’t yet able to make full use of the country’s output, Peng said. The government is likely to hoard these elements for future use, she said.

“‘The mining and refining industry, hampered by a drastic slump in prices, sees the purchase as a life-saver,’ said Chen Huan, an analyst at Beijing Antaike Information Development Co. ‘Prices the government agreed to pay are much higher than the prevailing market price.’”

In March, the World Trade Organization ruled in favor of the U.S., Japan and EU’s contention that China’s Rare Earths export quotas were not justified. As a source within one of China’s state-owned enterprises told Bloomberg:

“‘China is facing imminent pressure to abolish the export quota, so stockpiling is part of the policy reaction to help prop up prices and keep more of the resources at home for future use.’”

As a follow-on, ARPN will share any U.S. Government reaction to this move – if in fact there is a reaction.

• The current WTO case brought on against China by the U.S., European Union and Japan over its restrictive Rare Earths policies is not because China has a geological monopoly, but rather, because other countries possessing REEs, including the U.S., have allowed China to develop a near-total production monopoly.

• It’s up- and downstream REE market dominance has prompted industries relying on Rare Earths to relocate production sites to China, and leaves the other parties to the WTO case, and the U.S. in particular, vulnerable to REE supply risk.

• To underscore the economic imbalance, the author of the report prompts readers to imagine the consequences for “Western economies if Saudi Arabia had been a technological and manufacturing giant at the time of the 1973 oil embargo” – which would have been control over energy supply and the world’s technological development. Even more troubling, while Saudi Arabia has been reliant on the projection of U.S. military power in the Gulf region, China has no such constraints and its foreign policy often clashes with Western interests.

• The importance of REEs cannot be underestimated, and China’s near total monopoly affects not only the green technology sector, but the defense and security sectors.

The author’s conclusion:

“A new approach is needed. Short of devolving tax dollars to developing alternative materials to REE, diversifying supplies while easing the mining regulatory framework to facilitate more domestic REE production is essential.”

The implications of mineral supply issues for our national security is an issue to which American Resources recently devoted a study.

In Reviewing Risk – Critical Metals and National Security, we cross-referenced 46 key minerals with U.S. Geological Survey reports on mineral reserves, supply risk and import exposure, and built a national security “risk pyramid” that helps visualize our over-reliance on foreign critical minerals.

The study is part of a series of reports and policy papers, the next one of which will take a closer look at one of the less-known properties of some traditional “mainstay metals” – their function as a “gateway metal” to critical technology metals.

Stay tuned for the announcement on the report’s release in the coming weeks.

In his latest column for Real Clear World, American Resources principal Daniel McGroarty zeroes in on the newly-released Chinese government white paper entitled ‘Situation and Policies of China’s Rare Earths Industry’ and notes the insight it provides into China’s broader mineral strategy. McGroarty’s key points are as follows: · The white paper essentially sets the [...]

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Over the past few days, the announcement that the U.S., EU and Japan have decided to file a WTO case against China over its restrictive rare earths policies has caused quite a stir. American Resources Policy Network principal Daniel McGroarty offers his perspective in a column for Forbes. Having previously expressed skepticism over the WTO [...]

The World Trade Organization (WTO) recently made headlines over its decision to notify the Chinese government that it is in violation of international trade rules regarding the country’s raw materials export restrictions covering bauxite, zinc, yellow phosphorus and six other industrial minerals. The case – brought about by the U.S., European Union, and Mexico in [...]